If You Like EPS Growth Then Check Out Home Bancshares (Conway AR) (NASDAQ:HOMB) Before It's Too Late

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and profit. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

In the age of tech-stock blue-sky investing, my choice may seem old fashioned; I still prefer profitable companies like Home Bancshares (Conway AR) (NASDAQ:HOMB). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

Check out our latest analysis for Home Bancshares (Conway AR)

Home Bancshares (Conway AR)'s Earnings Per Share Are Growing.

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). It's no surprise, then, that I like to invest in companies with EPS growth. It certainly is nice to see that Home Bancshares (Conway AR) has managed to grow EPS by 20% per year over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). I note that Home Bancshares (Conway AR)'s revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. Home Bancshares (Conway AR) maintained stable EBIT margins over the last year, all while growing revenue 29% to US$731m. That's a real positive.

In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. To that end, right now and today, you can check our visualization of consensus analyst forecasts for future Home Bancshares (Conway AR) EPS 100% free.

Are Home Bancshares (Conway AR) Insiders Aligned With All Shareholders?

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. As a result, I'm encouraged by the fact that insiders own Home Bancshares (Conway AR) shares worth a considerable sum. Indeed, they have a glittering mountain of wealth invested in it, currently valued at US$275m. I would find that kind of skin in the game quite encouraging, if I owned shares, since it would ensure that the leaders of the company would also experience my success, or failure, with the stock.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? A brief analysis of the CEO compensation suggests they are. For companies with market capitalizations between US$2.0b and US$6.4b, like Home Bancshares (Conway AR), the median CEO pay is around US$5.3m.

Home Bancshares (Conway AR) offered total compensation worth US$4.6m to its CEO in the year to . That comes in below the average for similar sized companies, and seems pretty reasonable to me. CEO compensation is hardly the most important aspect of a company to consider, but when its reasonable that does give me a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Should You Add Home Bancshares (Conway AR) To Your Watchlist?

Given my belief that share price follows earnings per share you can easily imagine how I feel about Home Bancshares (Conway AR)'s strong EPS growth. If that's not enough, consider also that the CEO pay is quite reasonable, and insiders are well-invested alongside other shareholders. This may only be a fast rundown, but the takeaway for me is that Home Bancshares (Conway AR) is worth keeping an eye on. Don't forget that there may still be risks. For instance, we've identified 2 warning signs for Home Bancshares (Conway AR) (1 is potentially serious) you should be aware of.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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